The retirement of Robbie Bach, president of Microsoft’s Entertainment and Devices (E&D) division, made some waves today. Bach’s resignation, along with the departure Xbox lead designer and senior vice president J Allard, has inspired talk of palace intrigue within the halls of Redmond. I don’t believe that the reorg was inspired much by politics–Microsoft is responding to the iPad.

Earlier today, I spoke with Directions on Microsoft director of research Robert Helm. Helm believes that introduction of Apple’s iPad raised the threat level to Windows so much so that the company required a new management team to formulate a clear response. “The primary mission of the Entertainment and Devices division has been to protect the Windows PC from threats by low-end consumer devices like game consoles and smartphones,” he explained.

Love it or hate it, the iPad is a game changer, and its initial sales have been impressive. Some analysts are predicting up to 10 million iPads being sold in a year; I saw more than a few guys with suits carrying iPads around at the airport this past weekend.

Microsoft has no direct alternative. It has canceled Courier, a product that was at least vaguely analogous to the iPad. And major Microsoft partner HP is now heavily invested in the WebOS mobile operating system following its acquisition of Palm.

Microsoft desperately needs to rewrite its story, and its one piece of good news right now is its rising star: Windows Phone 7. The massive makeover of Windows Mobile has received more than a few positive early review, and was the work of a small, motivated team at Microsoft which worked independently and thought about usability. Whether that success can be duplicated for other products remains to be seen. I suspect that today’s reorganization is an attempt to become more nimble. The executives that assumed Bach’s responsibilities report directly to CEO Steve Ballmer, and Bach’s management layer was eliminated.

Microsoft has a lot of raw material to work with. It has solid programming tools, Microsoft Office, its Live Web services, Windows Phone 7, and Xbox games. The right combination of any of those products could yield some compelling results if small, cohesive product teams are allowed to think and behave creatively. With all due respect to Bach and his many accomplishments, it’s about time that Microsoft trimmed the fat.

I don’t think this reorganization was a direct response to iPad. I think it was a response to HP’s response to iPad, i.e. they bought Palm’s operating system.

Ballmer got asked a lot over the last while if he was going to buy Palm, and he laughed it off like Palm made operating systems for toy cars. Then his biggest partner bought Palm and replaced Windows 7, Microsoft’s flagship OS, with Palm’s OS, in the very device Ballmer demoed at CES, and which stole the show from him to boot.

Consider:

> “The primary mission of the Entertainment and Devices
> division has been to protect the Windows PC from threats
> by low-end consumer devices like game consoles and
> smartphones,”

You mean like if the biggest Windows licensee buys their own Unix-based smartphone operating system? Oops.

MS is on the brink of falling into permanent irrelevancy in the mobile sphere. Apple was damaging, but Google is the killer. WinMo 7 is its last “hail mary” gambit, but it’s just too little and way way too late.

So what does Ballmer do? rearrange the deck chairs. even though it was he that said three years ago “i like our strategy, i like it a lot.” the same strategy that now lies in ruins.

i think this is his last reorganization. next time, it will be his head that gets chopped. start the countdown. 18 months.